BANKRUPTCY - Chapter 7 vs. Chapter 13
General Information You Must Know 

Chapter 7 - This type of filing is what most people associate a bankruptcy with because none of the unsecured debts are repaid.  Under chapter 7,  a bankruptcy trustee is appointed and then sells your nonexempt assets.  Your debts are then liquidated with the proceeds from the sales.  Creditors are legally prohibited from calling you or making any attempt to collect the debt. Usually, the mere mention of bankruptcy to a creditor and referral to your bankruptcy attorney keeps creditors temporarily at bay.  However, your debts are only discharged after the court grants the discharge.  Secured debts, where there is collateral or lienholders involved, do not get discharged.  The court grants the discharge immediately upon expiration of the period of time set for a creditor to file a challenge or objection in the form of a complaint or motion to dismiss.   

Chapter 13 - This filing of bankruptcy is an option for those who want to pay their creditors but simply cannot afford it because of financial hardship.  Again, the creditors are prohibited from taking any collection efforts against you.  Under Chapter 13, the court requires you to submit a plan for repayment of your debts at a discounted rate for a 3 to 5 year period.  Creditors will require you to show that you cannot afford to pay even half of the debt.  Once you demonstrate that you cannot, creditors are not likely to challenge the discharge.  The judge then approves your plan.  After all payments are made, you receive a discharge from the court.  The protections granted under Chapter 13 are very similar to debt consolidation with the exception that you do not have to go through the courts to negotiate with creditors and you can afford the minimum monthly payments required.  

Please keep in mind that the information provided here is very general in nature and that, if considering bankruptcy, you should obtain legal advice from a bankruptcy attorney.

There are alternatives to bankruptcy you cannot afford to ignore:

• Debt consolidation

• Equity line of credit

• Debt consolidation loan

We do not recommend debt settlement.

Be informed.  The largest debt you owe is to yourself. 

This information is subject to periodic updating.  It should not be relied upon nor is it intended to be or replace any legal advice.  If you need legal advice please consult an attorney.

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